Eastern Fisheries Co. purchased equipment on January 1, 20X1 for $22,500. The equipment had an estimated useful life of 10 years and an estimated residual value of $2,500. The company uses double-declining-balance depreciation.

-Assuming Eastern uses double- declining-balance depreciation, what would be the book value of the machine on December 31 20X2?

Question

-Assuming Eastern uses double- declining-balance depreciation, what would be the book value of the machine on December 31 20X2?

Quizplus · Accepted Answer

The double-declining-balance depreciation rate is 2/10 or 20% per year. The first year's depreciation is 20% of $22,500, which is $4,500, leaving a book value of $18,000 at the end of 20X1. The second year's depreciation is 20% of $18,000, which is $3,600, leaving a book value of $14,400 at the end of 20X2.